Market Entry Strategies in a Global Business

Abstract

This document analyzes the positive and negative aspects of five market entry strategies that could be utilized by an international business during the implementation of a global strategy.

Keywords: International business, global strategy, market entry strategy

1 Background

Making the right decisions when entering a foreign or international market can make a tremendous difference in a company`s bottom line (Kotabe & Helsen, 2009, 291). However, the opposite is also true: making the wrong decisions can also make a tremendous difference in the company`s bottom line. The right decision, of course, brings in money and helps the company prosper. It can result in eventual profitable world-wide expansion. The wrong decision, however, can result in decisions that literally kill the company. The importance of making the right decisions cannot be underestimated. This paper uses a theoretical expansion into India as a starting point, and considers how to expand with a DVD or DVR system (utilized for example only).

Market entry strategies are not created in a vacuum. They are closely related to other decisions that involve the entry of new products into any market. According to Kotable and Helsen (2009, 291) the company has to decide on the product, the target market, the objectives for the markets, the mode of entry, time of entry, marketing mix, and a way to monitor marketing performance. Taken together these criteria form the market entry strategy.

Cunningham, on the other hand, suggests that strategies used for entry into new foreign markets can be defined into five strategies:

- Technical innovation, where the company either has truly superior products or can convince the customer they do. This can also include a high level of technical service.

- Product adaptation, where the company makes modifications to products that already exist. This can include on time delivery, service adapted for the customer market, and so on.

- Availability and security, where the company is able to help overcome transportation risks by either convincing the customer they are not important, or by offering delivery, installation, service, and security.

- Low price strategy by developing a low price specifically to penetrate the market.

- A total adaptation and conformity strategy, where the foreign producer takes a holistic approach to doing everything the customer might need in terms of product, handling, development, and delivery (Cunningham 1986, 9).

The first four strategies are very similar to Porter`s generic marketing strategies. Porter suggested that there were four basic strategies: cost leadership, differentiation, cost focus, and differentiation focus. Cost leadership essentially means that the product would be the lowest cost items in field (Cunningham`s low price strategy), while differentiation refers to creating products that are unique and thus desirable (product adaptation). In Porter`s works, focus suggests the concept of adding a specialized service, with a focus on either cost or differentiation. Cunningham would suggest that this focus is more on availability and security (transportation) with an overall emphasis on either total adaptation and conformity or on technical innovation. The entire goal of both Cunningham`s works and Porter`s works is to gain market share. The analysis of potential strategies will suggest the best approach to take in the market that the company will enter.

Once the decision to go overseas or into the international market has been made, the strategies have to be considered, but none of the strategies standalone. Other inputs are involved in being competitive.

2 Seeking Competitive Advantage

Competitive advantage can arise from efficiency, from strategic decisions and advantage, from taking risks, from learning, and from developing the brand and reputation. Efficiency comes from economy of scale, but it can also come from operational flexibility. The ability to shift production to adjust cost and expense, the ability to exploit exchange rates, and the ability to take advantage of other situations that may come up locally. It is also possible to take advantages of the resources offered in other nations. There are few people who are not aware at this point that labor is significantly cheaper in other parts of the world.

2.1 Efficiency

To put the economic advantages of opening a business in India in perspective, Price Waterhouse reported in 2005 that roughly 2.5 million people per year in India graduate with a university degree (Price Waterhouse, 2005). These individuals are billed as being highly qualified. Of the 2.5 million people who graduate with a university degree, approximately 200,000 graduate with an engineering degree of one type or another (WENR, 2007). In 2008, Reuters suggested that the figure might be higher, perhaps as high as 250,000 (Reuters, 2008). There is, clearly, a large population of highly educated workers to draw from. Making the situation even more attractive, the average graduate from an Indian university makes only $2,400 per year USD. Incomes are currently raising approximately 10 to 15 percent per year. Contrast this to the average young engineering graduate in the US, who starts at roughly $40,000 in the communications engineering friend and ranges to $64,000 in the aerospace field (Knovel Solutions, 2012)

With a difference of $38,000 to $62,000 per single employee, it is very easy to see how a company wishing to open up a branch in India might decide to export items back to the United States, at a cost savings. The competitive advantage would be immense. The cost of employees is so low relative to cost in the UK and United States that companies who open branches in India could also pay employees a premium to get the very best employees, and still be receiving an advantage. In the case of an American company who pays their Indian employees $3,500 a year rather than $2,400, the company would still be getting a value-added proposition of as much as $61,000 per year.

Another form of efficiency develops from economy of scale. If the company is producing widgets that everyone wants (or needs), then Indian and Pakistan are good places to be, as would be Hong Kong. Areas that have a high concentration of population, a needed product, and a developed market can provide economy of scale. If the widget is also needed or popular throughout the Middle East, Asia, or United States, it becomes a value added proposition.

In lesser-developed nations, it may be possible to extend product lifecycle. Somewhere, the DVD player may be a hot commodity! Companies can capitalize on extended life cycles and utilize highly educated employees to develop new products at a lower cost. The last facet of efficiency is the flexibility that occurs when shift workers are paid less. It can cost far less in lesser-developed nations to run a production line than it does in UK and US.

2.2 Strategic

If the product is going to be the first mover (and only provider, initially) of a product to market, there can be a strategic advantage. Using the example of the DVD, above, we can postulate that the first company to bring the hypothetical nation from DVD to DVR would have a real advantage. If something can be worked out to subsidize production or distribution over several nations, that would give an advantage also. Finally, the transfer pricing may offer strategic advantage. Kalyanarm and Gurumurthy (1998) suggests that companies which cannot be first in, or a "pioneer", may be able to gain advantage by attacking the first mover directly and aggressively. As they point out, aggressive competitiors can knock down the leader if they plan the market attack correctly. Conversely, companies that are are pioneers must take steps to ensure that their market share does not erode when a new company enters the market (Kalyanarm & Gurumurthy, 1998, 1).

2.3 Risk

Risk can be a huge factor in the corporate strategy. The SWOT analysis and the PEST analysis address risk when they look at the political situation (Pest) and threats (swoT). Risk can also arise from inside the company (sWot) when someone has miscalculated the probability of failure versus the possible payoff. The external risks relate to the possibility of war, terrorism, or infrastructure failure. Threats can be the threat of attack or threat of change of national leadership and thus a change in how the country perceives foreigners. There is a risk that no one will buy the product. Perhaps no one in the nation can envision the need for a product like a DVR. If this is the case then the first mover would have a terrible problem creating a market. Other risks, internal risks, include the possibility that the market analysis was inaccurate and thus the estimations are incorrect. The company may exceed the planned budget significantly. In more rural nations, infrastructure can become an issue. To understand this, realize that if the company planned to distribute the DVRs through a mountainous highway (because there was no other way to get them to the town on the other end) and the highways were bombed by terrorists, the distribution plan would fall apart. The next question would be: do we send them in by burro? Do we drop them from a plane? Do we wait until the road is rebuilt? Any alternative would be very costly. What happens if a tsunami takes out the coastal distribution areas, or an earthquake damages the factory? All of these risks must be considered.

2.4 Learning/Knowledge Management

Establishing a center of knowledge in the company may not seem important, but it empowers employees both from a technical standpoint and from the standpoint of flexibility and longevity. If the nation is particularly oriented towards education (as is India, for example) then helping employees develop their knowledge (and in turn give it back to the company) would be a welcome benefit to employees.

2.5 Brand and Reputation

Companies live and die on their brand. Can a known brand be utilized, or must a new one be developed? What is the company`s reputation in the area that the company has planned for a factory? One tragic example is the Union Carbide brand. Willey and Berger (2006) pointed out that the explosion in Union Carbide`s plant in Bhopal caused 3,787 people to die on the spot; eventually over 10,000 had died and somewhere between 200,000 and 578,000 were injured. The chairman of Union Carbide was charged and arrested. He jumped bail and India was not successful extradicting him from the US (Polgreen & Kumar, 2010). Surely no one in India, or much of the eastern world, will ever trust Union Carbide again.

3 Forms of Strategy and Modes of Entry

The strategic considerations of entry strategies have been considered, but there are so many more things to think about. Will the company use a multi-domestic strategy, customize the product for each market, and use local decision making? Or will they use a global strategy, with the product the same everywhere? Even McDonald`s, the king of sameness, was forced to concede that to survive in a competitive market, they would have to allow local stores to make marketing decisions and personalize food. Thus, McDonald`s in Islamic nations does not serve the McRib; in Albuquerque, NM they serve the chile sauce that all of the customers demand. The multi-domestic strategy works for them.

Finally, the mode of entry must be considered. Will the company export directly? Will it license or franchise its name? Will it form a joint venture with a company in the host nation? Some nations require this type of partnership in foreign investment, but other times the company itself prefers it. Will the company enter the nation through foreign direct investment (i.e., invest in local companies)?

4 Conclusion

No matter what the perceived goal of the company is, the actions the company takes must be personalized to that goal. Union Carbide chose to enter a joint venture with a company in Bhopal. In retrospect, the decision would be different - or perhaps the joint venture partner would be different. Every company has decisions it would undoubtedly change; sometimes the decisions have a huge impact on the company`s eventual survival. This paper has endeavored to explain the decisions and choices involved in the analysis of five potential market entry strategies in implementation of a global strategy for an international business.

References

Cunningham, M., 1986. Strategies for Internatonal Industrial Marketing. In: P. Turnbull & J. Valla, eds. Strategies for Internatonal Industrial Marketing. London: Croom Helm, p. 9.

Kalyanarm, G. & Gurumurthy, R., 1998. Markey entry strategies: Pioneers versus late arrivals. Best Practice, pp. 1-10.

Knovel Solutions, 2012. Engineering salaries in 2012.

[Online]Kotabe, M. & Helsen, K. Global Marketing Management. 5th ed. Hoboken, NM: John Wiley.

Polgreen, L. & Kumar, H., 2010. 8 former executives guilty in '84 Bhopal chemical leak.

[Online]Porter, M. Competitive Strategy: Techniques for analyzing industries and competitors. New York: Free Press.

Price Waterhouse. The evolution of BPO in India.

[Online]Reuters, 2008. India's outsourcing revenue to hit $50 bn.

[Online]WENR, 2007. Engineering education in India: A study in contrasts.

[Online]Willey, R. H. D. & Berger, S., 2006. The accident in Bhopal: Observations 20 years later. Orlando(FL): American Institute of Chemical Engineers.

Positive Co-Teaching in Education

As the U.S. becomes increasingly more diverse, and greater numbers of public school children have need of ESL instruction, educational systems are looking at more nontraditional ways of teaching. About a decade ago, this language curriculum was mostly offered through a pull-out model. Students left their mainstream classroom and headed out to separate, shorter-length classrooms for a couple of periods a day for instruction in listening, speaking, reading and writing (McClure & Cahnmann-Taylor McClure, 2010). These ESL students often fell behind in mainstream classroom curriculum, because of their absence. Also, the ESL specialist and grade teacher rarely collaborated on material. In addition, pulling out these students stigmatized them with other as less educationally capable. In the past decade, many schools have been turning this situation around and "pushing-in" the ESL students. These pupils are remaining in the classroom, and the ESL and grade-level teachers are co-teaching. In addition to educational benefits, this teaming up offers another advantage: More space. The population in many schools is becoming so large, these joint efforts free up valuable areas. There is no need to hunt around the school for quiet spaces where small groups of students are able to meet for language lessons. The model appears to be based on the principle that encouraging language and content development together is the most inclusive and efficient model possible. Yet, these co-taught classes present new challenges and both teacher colleges and the school systems, themselves, need to provide support and structural models on how these co-teaching classes can best be run.

Villa, Thousand and Nevin (2004), define "co-teaching" as at least two educators sharing instructional accountability for students in the same classroom. The actual way that this co-teaching is achieved will vary based on the school and educators, but always is based on encouraging both language improvement and content development. In a study about pull- versus push-teaching, one of the teachers surveyed was responsible for pull-out ESL instruction for five years in an elementary school in the Southeast United States. She said the switch to co-teaching was the best move possible: "When teachers collaborate and combine their talents, everyone benefits" (p.6). Other benefits gained include fuller participation for all students in the classroom, better outcomes for student learning and improved feelings of self-efficacy for the teachers. Yet it is clear that discussing the benefits of collaboration and actually collaborating are two different things, as noted by Kaufman and Grennon-Brooks (1996, p. 231): "Collaboration between ESOL teachers and teachers of other subject areas is imperative. Teacher education programs must reevaluate current pedagogical orientations and reorganize to prepare teacher candidates of all disciplines for coordinated interdisciplinary education for all students." As noted, many comments correctly explain the benefits of co-teaching, but they do not pay enough importance to the difficulty that such sharing arises, as well. Collaboration can be a very complex activity, as well as exhausting and frustrating for both teachers and student. Davidson (2006), explains that such co-teaching is often represented by an imbalance of leadership, obligations and assessment.

There are several standard forms of co-teaching. In the traditional approach, two teachers instruct several groups of pupils in the same content. Both instructors stay in the content classroom during the whole lesson. This approach offers the advantage of continuous support for the students who require specialized instruction, while the special language educator is able to retain curriculum and instruction continuity. However, beyond these benefits, certain downsides also arise to this teaching model. First, in most cases there are not a large enough number of special educators to co-teach in these general classrooms. Either of these teachers has to travel from one class to the next, which interrupts the instruction of both the teachers and students. Or, in other classes, the situation returns to being one-sided toward students who need customized help. Also, the content teachers often expects their ESL co-teacher to serve as an assistant and follow their lead rather than work together as a team.

Friend and Cook (2007) describe five approaches to co-teaching, which are hierarchical across three variables as they progress in effectiveness from one level to the next: 1) they require that the two teachers spend more time together in planning; 2) the instructors need to have the same degree of understanding about the content being learned, which frequently presents the greatest challenges for the most effective results; and 3) teachers must share a similar perspective of inclusion and further an environment of trust and respect. Such characteristics do not develop over night, which is another reason why co-teaching can be quite difficult and rarely achieved without considerable time and guidance.

According to Friend and Cook (2007), these are the five major ways to co-teach in hierarchal order: 1) Lead and support, where one instructor takes the leadership role and the other provides assistance and guidance to a student or smaller groups of students. In this case, one teacher handles the planning for the overall content and the other for the student`s particular instructional or behavioral requirements; 2) Station teaching, where pupils are split into diverse groups and each teacher works with them at individual stations; 3) Parallel teaching, when the two instructors deliver content to half the class or in smaller groups. This approach demands greater team planning to make sure that the teachers deliver similar content in a similar manner; 4) Alternative teaching, when one instructor helps a small group of students to pre-instruct, review, provide supplement assistance or enhance learning, while the other instructor leads the larger group. Preplanning is very important in this approach, as well, since it takes effective logistics between the teachers and equal understanding of the content; and 5) Actual shared teaching, where both of the teachers plan and instruct the students in a coordinated way and need to have the same knowledge of the content area, perspective of teaching, commitment to their instructional goals and joint planning. This is the most challenging form of co-teaching, and may take several years of the teachers working together and learning the best way to utilize each other`s strengths.

Most of the studies on co-teaching have been anecdotal. In one of the few research examples, York-Barr, Ghere, and Sommerness (2007) led a three-year study of co-teaching at a Midwest U.S. elementary school. The study analyzed the instructors` viewpoints about collaborative teaching and the impact on ESL students` improvement on reading and math testing. The study showed that both the teachers increasingly found this as a positive approach to instruction, and ESL students` improvements continued to improve with classroom collaborative teaching. However, such positive results from co-teaching in schools at other schools worldwide have not been as positive. Creese (2002), for example, studied the collaboration of co-teachers in English high schools through teacher interviews and fieldwork. The author found that the teaching of content was believed to be more valuable than the ESL teachers` support and help. Both secondary and elementary school teachers considered ESL teachers` abilities and knowledge as secondary to the learning experience and knowledge of subject areas. Davison (2006) studied the work of co-teachers at an international school in Taiwan and found that the collaboration between the ESL and content grade-level teachers did not rely on co-planning and supporting each other`s efforts. These teams were imbalanced in power. She argues that such co-teaching requires critical reflection, so that these collaborations can be effective for everyone involved. Other studies have found that power revolves around such issues as language, ethnicity and perceptions of the ESL teacher`s professionalism. Even though teachers say that they want to collaborate and communicate more directly and frequently with one another, they do not have a workable structure or framework to follow and support their positive interests. They all agreed that such co-teaching is very difficult and requires continual dialogue and help with knowing the most productive ways to promote collaboration.

In many cases it is also found that states and district administrators develop ways for co-teaching without actually getting the input of the teachers and background on their experiences and relationships with each other. Many times, inclusion was instituted just for the sake of inclusion without any concerns for structure, outcome or measurements. Davison (2006) adds that teachers say that even though there are many differences in how these directives are implemented at the varying school levels, in most cases there is strong pressure by the school districts to continue to increase their co-teaching efforts" good or not. There is not often a true commitment to the process and a framework to follow that has proven to be successful. It is therefore necessary for teachers to find their own way of collaborating.

McClure and Cahnmann-Taylor McClure (2010) agree with Davidson (2006) and recommend the necessity of performance-based professional development and providing teachers with a creative and successful method for the facilitation of productive co-teaching. This will help improve characteristics that make the process ineffective and impact the positive outcome of collaboration, such as conflict, tension, and personality differences. These authors believe that through performance-based workshops, ESL and grade-level teachers can better articulate and role play some of their most challenging problems. They can work together in an environment where listening skills and risk-taking is supported and enhanced and real case studies are discussed and dissected. With time, many of the walls between these teachers can break down as they understand their similarities in goals and commitment to learning. It is necessary, reflect McClure and Cahnmann-Taylor MclClure, that all teacher education programs include coursework on co-teaching and collaboration. Unfortunately, such courses on collaboration are conducted in the segregated certification areas" with ESL teachers and content-teachers learning such abilities separately rather than together, although they are supposed to be working together after graduation. Even when pre-service instructors start to develop an understanding of the importance of collaborative efforts, they rarely have the chance to experience what is learned with teachers in other discipline areas.

A decade ago, many educators recognized the need for greater collaboration between content and ESL teachers. However, it does not appear that much headway has been made during these past ten years in actual implementation of a collaborative nature. Although, as noted, co-teaching and the benefits derived are discussed and recognized as critical factors in improving educational outcomes and positive institutional change, relatively little collaboration between content and ESL teachers actually takes place. When it does occur, about 73 percent of teachers find these collaborative efforts as "largely inadequate" (Leonard & Leondard, 2003, p. 6). Even though in college teacher programs the benefits of collaboration are reinforced, not much change has taken place on a middle or high school level between ESL and mainstream teachers (Creese, 2002). Collaborative teaching is being highly supported as a teaching model for English-language learners from legislative, theoretical and educational purposes. Given the growing population of the language learner population over the next several decades, the need for collaboration between ESL and mainstream teachers is going to become increasingly more critical. Being the fastest growing segment of school-age demographics and an area that falls behind academic attainment, ESL learning is becoming an important subject for legislators, educators and the general public, with the main question of how to meet the specific needs of this linguistically diverse student population. Growing immigration has been accompanied by the number of homes where languages other than English is spoken. The Limited English Proficient population in the U.S. grew by 52 percent between 1990 and 2000, or from 14 to 21 million. Thomas and Collier (2002) forecast that students with a home language other than English will make up 40 percent of the school-age population by 2030, and this is a cautious number and most likely will include much higher numbers. Co-teaching may not be acceptable to everyone, but it is being promoted by many as the most logical, effective and advantageous solution to this problem.

More studies need to be conducted showing the value of the few examples of positive co-teaching. In addition, researchers must address specific questions related to the poor adoption of this form of teaching. What specific barriers and challenges face mainstream and ESL teachers when trying to collaborate? How can these barriers be minimized? What negative attitudes exist that keep teachers from considering the act of collaboration? Why do these attitudes exist and what can be done to change them? A commitment does exist by educators to best meet the instructional needs of their students. More emphasis will need to be placed on co-teaching in a very short period of time in order to meet the changing needs of the student population.

References Cited

Creese, A. (2002). Teacher collaboration and talk in multilingual classrooms. Clevedon, England: Multilingual Matters.

Davison, C. (2006). Collaboration between ESL and content teachers: How do we know when we are doing it right? International Journal of Bilingual Education and Bilingualism, 9,454"475.

Echevarria, J., Vogt, M. E., & Short, D. (2008). Making content comprehensible for English language learners: The SIOP model. Boston, MA: Allyn & Bacon.

Friend, M. P., & Cook, L. (2007). Interactions: Collaboration skills for school professionals Boston, MA: Pearson.
Kaufman, D. & Grennon Brooks, J. (1996). Interdisciplinary collaboration in teacher education: A constructivist approach. TESOL Quarterly, 30, 231-251.

Leonard, L. & Leonard, P. (2003). The continuing trouble with collaboration: Teachers talk. Current Issues in Education, 6(15).
McClure, G., & Cahnmann-Taylor McClure, M. (2010). Pushing Back Against Push-In:

ESOL Teacher Resistance and the Complexities of Coteaching. TESOL Journal 1(1): 101-129.

Rice, D. & Zigmond, N. Co-teaching in secondary schools: Teacher reports of developments in Australian and American classrooms. Learning Disabilities Research & Practice, 15(4), 190-197.

Thomas,W.P.,& Collier, V. P. (2002). A national study of school effectiveness for language minority students` long-term academic achievement. Discrimination Coordinator: Washington, D.C.

Villa, R. A., Thousand, J. S., & Nevin, A. I. (2004). A guide to co-teaching: Practical tips for facilitating student learning. Thousand Oaks, CA: Corwin Press.

York-Barr, J., Ghere, G., & Sommerness, J. (2007). Collaborative teaching to increase ELL student learning: A three-year urban elementary case study. Journal of Education for Students Placed at Risk, 12, 301 "335.